Contracts for Difference (CfD) Allocation Round 4: Subsidy Control Transparency Database estimates
Published 24 November 2022
© Crown copyright 2022
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/contracts-for-difference-cfd-allocation-round-4-subsidy-control-transparency-database-estimates/contracts-for-difference-cfd-allocation-round-4-subsidy-control-transparency-database-estimates
Contracts for Difference are 15-year contracts in which renewable generators receive a variable payment between their agreed ‘strike price’ (the price (£/MWh) they receive in the Allocation Round) and the ‘Reference price’ (a measure of the market wholesale electricity price).
The total subsidy a generator will receive is therefore the total of the variable payments over the 15-year contract period. The actual subsidy amount for specific projects cannot be predicted in advance as it is dependent on several uncertain factors including future wholesale prices and how much electricity each project generates, which relies on both the weather and bids put forward by all other generators in each price period.
Subsidy amount estimates
For the purposes of the entries on the Subsidy Control Transparency Database, we have calculated a subsidy amount which may represent a higher end estimate. Given the uncertainties set out above, it is important to note that the actual subsidy amount is likely to be higher or lower than the figures presented.
In broad terms, the approach primarily uses the ‘Valuation Formula’ and associated assumptions from the AR4 Allocation Framework.
On the database, there is an overall estimate for Allocation Round 4 and individual estimates for each project which has a contract and will therefore likely receive a subsidy. Uncertainty is greater for project level estimates than for the total. Project specific variables including future load factors will have a significant impact on future subsidy which will impact the accuracy of the estimate. However, given the small size of some of these estimates we have rounded to the nearest £5 million.
The total subsidy amount for Allocation Round 4 has been rounded to the nearest £5 billion to reflect the inherent uncertainty with the estimate. The sum of the individual estimates may therefore not sum to the total estimate of the Allocation Round.
The figures are presented in current prices (October 2022) and are undiscounted estimates.